Biofuels in Virginia

Liquid biofuels are manufactured at several small refineries in Virginia, and a large-scale ethanol plant finally started operating in 2014.

In 2011, Osage Bio Energy completed a roughly $200 million ethanol production facility to make 65 million gallons of ethanol per year in Hopewell from barley. Perdue Grains contracted with Virginia farmers to grow barley as the feedstock to be converted into ethanol. Osage Bio Energy planned to convert the starches in the barley grains into ethanol, while the hulls of the grain would be burned for energy and the dried distillers grain (DDGS) residue would provide a protein-rich food supplement for livestock.

The facility was expected to require 300,000 acres to grow 28 million bushels of barley. The Hopewell plant, the first ethanol production facility on the East Coast, was predicted to create a $100 million demand for a winter cover crop that would simultaneously enhance water quality, by utilizing nitrates in the soil that otherwise washed into the Chesapeake Bay.1

The completed plant never opened as planned in May 2011, apparently because the investors (First Reserve, an equity firm in Connecticut) were unable to get a bank to provide operating capital. To maintain its reputation within the farming community, Perdue absorbed a financial loss and bought the 2011 crop of barley anyway. The City of Hopewell, which had anticipated $5 million/year in tax revenues, had to sue First Reserve to collect some of the promised financial benefits.

In 2013 the equipment was sold to a company that planned to dismantle the plant and move the equipment to Northeast Lincolnshire in England. In 2014, the Hopewell City Council agreed to match a $250,000 grant from the Governor’s Agriculture and Forestry Industries Development Fund, and the state committed up to $1.5 million/year in subsidies through 2017.

That commitment convinced the British company Vireol to start operations at the ethanol plant in Hopewell, rather than move the equipment. Up to 70 jobs were created when the plant opened in 2014, and Virginia farmers gained a customer interested in purchasing over $30 million of corn, wheat and barley each year.2

equipment at the ethanol plant in Hopewell could have been shipped to the village of Great Coates in Northeast Lincolnshire
Map Source: Google Maps

Biofuels is a high-risk business. Expenses are guaranteed, but profits are not. In 2015, Vireol stopped operating and was forced to declare bankrupcy. Green Plains, a large ethanol producer, acquired the Hopewell facility, spent $10 million to upgrade it, and restarted operations in 2016.

The Hopewell facility is the only facility in Virginia producing ethanol for sale in large quantities. It's product is sold to gasoline terminal operators in the Richmond/Petersburg , who blend the enthanol with gasoline before it is trucked to retail outlets for sale. Green Plains also sells the residue from the corn, distillers grain, to local farmers for livestock food.

Rather than rely upon barley, Green Plains planned to purchase 62,000 bushels of corn annually. As the plant manager described the facility:3

Even without the Hopewell facility, Virginia farmers can grow barley for ethanol and soybeans for biodiesel. Hampton Roads ports offer easy transportation options to export biofuels. West Point, Yorktown, Craney Island, and Portsmouth are likely candidates for future ethanol/biodiesel refineries producing fuel from renewable resources, at a scale large enough for barge export.

Virtually any location near an existing petroleum tank farm than blends gasoline with ethanol is suitable for a small-scale refinery producing E-10, E-15 or E-85 gasoline. Small projects owned by local farmers, cooperatives, or business leaders are also economically feasible.

Osage Bio Energy expected barley to be an interim source of biofuels, until switchgrass or other sources of cellulose could replace it
Source: Osage Bio Energy (November 18, 2009 presentation to Mid-Atlantic Crop Management School)

Since 2008, Red Birch Energy in Bassett (Henry County) has been buying canola seeds to create biodiesel sold at the company's Country Market Biodiesel Truck Stop. Canola is purchased from North Carolina suppliers, as well a farmers in Pittsylvania County, Virginia, and converted into B20 (20% from canola, 80% diesel refined from petroleum) and B100 biofuel in a $1 million refinery.

The project was stimulated in part by the truck stop's difficulty in getting fuel after Hurricane Katrina forced refineries on the Gulf Coast to close in 2005. The result was the first closed-loop biofuel delivery system in the country, where the owner could say "We grow it, we make it, we sell it, all in one community."

To facilitate using the glycerin residue from refining canola to generate electricity and power the truck stop's operations, the Biomass Energy Grant Program of the 2009 American Recovery and Reinvestment Act provided $750,000 (of the $1.2 million project) in Federal funds to Red Birch Energy.4

The Virginia Tobacco Indemnification and Community Revitalization Commission is providing state-sponsored financing in the former tobacco growing areas, in hopes of creating jobs for farmers and in refineries that create biofuel. The commission funded an assessment of nine potential biomass projects in Southside Virginia and ten sites for such projects in Southwestern Virginia, looking beyond biodiesel to the option of using cellulose-based material to generate electricity.

The top two opportunities identified were for a biomass-fueled heating system to service 20 buildings at Charlotte Court House, and a similar system to heat four facilities in the Town of Independence (Grayson County). The projects would be cost-effective if the biomass operation was large enough to generate surplus electricity to be sold to the local utilities, as well as heat for the buildings.5

In 2012, the Virginia Tobacco Indemnification and Community Revitalization Commission did provide $2.7 million to Tyton BioSciences in Danville, to create ethanol and biodiesel directly from tobacco. Farmers typically grow only 6,000 tobacco plans/acre, but if energy feedstock was the goal then farmers would grow 80,000-100,000 plants/acre. The company's founder chose Danville for a reason:6

"It was no accident that we choose Virginia and specifically, Danville. This science is now moving towards the commercialization phase, and we wanted to be in a place where there was a lot of tobacco growing know-how and rich history of agriculture, so Danville was a natural fit...

In 2013, Piedmont BioProducts received $5.3 million in state grants to build a biodiesel refinery in Gretna. The goal was to convert perennial grasses such as switchgrass (Panicum virgatum) into biodiesel, creating jobs in the farming community to grow the feedstock and jobs at the refinery to create the biodiesel.7

Another oil refining opportunity is to recycle waste cooking oil and fats ("yellow grease") from restaurants, creating biofuel for use in cars and other machinery. In 2007, the Virginia Tobacco Indemnification and Community Revitalization Commission awarded Synergy Biofuels a grant to fund half of a new $1 million biodiesel fuel production facility in Lee County, in part because "There is a plentiful supply of used vegetable oil around the neighboring areas."8

Darton Environmental, a small garage-based business in Bedford, expanded in 2013 and established a new refinery at an industrial site to process grease/oil generated at food establishments around Roanoke and Lynchburg. Shenandoah Agricultural Products in Frederick County has established its own closed-loop system. It raises canola and produces edible fryer oil, which is sold to local restaurants. The waste oil is collected from those restaurants and used to produce biodiesel, which then fuels operations on the farm that raises the canola.9

not every place called a "refinery" processed petroleum - the Capitol Refinery, located where the Pentagon now sits, was built to process cottonseed oil into 1,000 barrels/day of salad/cooking oil10
Source: Library of Congress, Capitol Refining Co. plant

Valley Proteins, headquartered in Winchester, produces lipids that are used as an animal food supplement, and today it converts used restaurant oil and animal fats into biofuel as well.

Since 1949, Valley Proteins has recycled waste oil from restaurant, chickens and turkeys that died before they were suitable for processing into human food, dead horses - and, at one time, pets collected from veterinarians. (After the US Food and Drug Administration banned the use of brain/spinal cord tissue from older cattle for production of animal feed to reduce the risks of "mad cow disease," recycling of most cows stopped.)

The company used to have a monopoly in Northern Virginia and Richmond as well as in the Shenandoah Valley. The company normally charged restaurants for removal of waste oil, since municipal solid waste landfills will not accept liquid waste, so the raw material was essentially free.

There were opportunities to generate profits from selling waste collection services to nearly 50,000 restaurants, plus profits from the sale of the processed "yellow grease" used as animal feed. After other biofuel companies entered the business, such as Greener Oil in Richmond in 2008, Valley Proteins was forced to compete in order to maintain its sources of supply.11

The governor of Virginia stretched the definition of "biodiesel" in 2014, when he announced plans by Appalachian Biofuels LLC to open a new biodiesel production facility in Russell County.

Appalachian Biofuels will use enzymes to reprocess used oil and oil products as the "feedstock" to produce "biofuel to be blended with petroleum diesel fuel as mandated by the federal government." The process does not involve using plant material to create fuel, but the state claimed a "green energy" company would produce an "alternative fuel."12

in early 2013, Virginia had 10 E85 fueling stations - 4 in Tidewater (Virginia Beach, Norfolk, Hayes/Gloucester County, Newport News), 2 on the I-95 corridor (Chester, Petersburg), 3 in the Piedmont (Charlottesville, Warrenton, Ashburn), and 1 in the Valley and Ridge province (Wytheville)

Production of ethanol and biodiesel from food crops, such as corn, canola, and barley, raises demand and thus the prices paid to farmers. Virginia adopted a voluntary Renewable Portfolio Standard (RPS) in 2007, but the Federal Renewable Fuel Standard (RFS) established a minimum volume of renewable fuel to be used annually for gasoline/diesel.

The proposed increase from 10% volume ethanol (E10) to 15% volume (E15) has triggered concerns that prices will stay so high that the livestock industry in Virginia and other southeastern states will be damaged. Concerned that the cost of ethanol was too high to justify an E15 Renewable Fuel Standard, Rep. Robert Goodlatte introduced legislation to repeal or modify the Federal Renewable Fuel Standard mandate.13

Goodlatte represented the 6th District, including the most productive livestock operations in the Shenandoah Valley, and Virginia does not produce enough corn to support its livestock industry. The Virginia Grain Producers Association claims the state imports 90% of its animal feed, while most Virginia-grown corn is exported. A 2012 study by an economist associated with the poultry industry claimed:14

- On an energy basis, ethanol has never been priced competitively with gasoline.

- Ethanol production costs and prices have ruled out U.S. ethanol use at levels higher than E10. As a result, we exported 1.2 billion gallons of ethanol in 2011.

- Due to its higher energy cost and negative effect on fuel mileage, ethanol adds to the overall cost of motor fuels. In 2011 the higher cost of ethanol energy compared to gasoline added approximately $14.5 billion, or about 10 cents per gallon, to the cost of U.S. gasoline consumption.

However, a separate study by the National Corn Growers Association reached a different conclusion. That study argued that beef and dairy farm profits have climbed since RFS expansion, though the 12 states analyzed did not include any Mid-Atlantic or Southeastern states (except Florida).15

Whatever the impact of the Renewable Fuel Standard on food prices or profits of different sectors of the agricultural industry - if ethanol remains more expensive than gasoline, and the Federal mandate for adding ethanol to transportation fuels is lowered, then the potential for another ethanol refinery in Virginia (in addition to the one at West Point) would drop until cellulosic-based facilities can replace those using food crops.

Switchgrass (Panicum virgatum) could be grown for a profit on agricultural land not suitable for food crops (too steep, too sandy, too poor in nutrients). Like any crop, switchgrass would have to be harvested, digested, and converted into ethanol. Switchgrass is a native species, but now rare due to patterns of past grazing:16

Switchgrass is a tall-growing, warm-season, perennial grass that is native to much of the United States including Virginia. Switchgrass (SG) was widespread in open areas before settlers populated an area and remained in one place year after year.

Their livestock were free roaming and would graze the new switchgrass growth in the spring before the new plants were tall enough to withstand defoliation. This mismanagement weakened the stands and eventually led to their demise. They were replaced by cool-season grasses introduced from other countries such as bluegrass, tall fescue, and orchardgrass.

These cool-season grasses began growth much earlier in the spring so they could tolerate the early season grazing by cattle. As a result, the native warm-season grasses such as SG were destroyed and can now only be found growing wild in abandoned sites such as old cemeteries or roadways.

In the future, tissue culture technology might facilitate production of genetically-identical plants to grow non-native grasses such as (Miscanthus genus), giant cane (Arundo donax), or other species for conversion into biofuels. The Institute for Advanced Learning and Research in Danville, working with the College of Agriculture and Life Sciences at Virginia Tech, has developed micropropagation technology that could result in commercial-scale production of biorenewable feedstock.17